EX-99.3 5 ex993proformafinancialstat.htm EXHIBIT 99.3 PRO FORMA FINANCIAL STATEMENTS Exhibit
Exhibit 99.3

Delek Logistics Partners, LP
Index to Pro Forma Financial Statements
Unaudited Pro Forma Condensed Consolidated Financial Statements:
 
 
 
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2019
3
 
 
Unaudited Pro Forma Condensed Consolidated Statement of Income for year ended December 31, 2018
4
 
 
Unaudited Pro Forma Condensed Consolidated Statement of Income for three months ended March 31, 2019
5
 
 
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
6


1 |


Delek Logistics Partners, LP
Unaudited Pro Forma Condensed Consolidated Financial Statements
On May 24, 2019, Delek Logistics Partners, LP (the "Partnership"), through its wholly owned indirect subsidiary DKL Pipeline, LLC (“DKL Pipeline”), entered into a Contribution and Subscription Agreement (the “Contribution Agreement”) with Plains Pipeline, L.P. ("Plains") and Red River Pipeline Company LLC (“Red River”). Pursuant to the Contribution Agreement, on May 28, 2019, DKL Pipeline contributed approximately $124.7 million to Red River in exchange for a 33% membership interest in Red River and DKL Pipeline’s admission as a member of Red River (the "Red River Pipeline Joint Venture"). Also pursuant to the Contribution Agreement, Plains, previously the sole member of Red River, contributed to Red River its ownership interests in the Red River Pipeline which consist of 60% ownership interest in the segment of the Red River Pipeline that starts in Cushing, Oklahoma and ends in Hewitt, Oklahoma and 100% ownership of the segment of the Red River Pipeline that starts in Hewitt, Oklahoma and ends in Longview, Texas. Pursuant to the Contribution Agreement, Plains retains ownership of a 67% membership interest in Red River. In addition, DKL Pipeline committed to invest (on a pro rata basis with Plains) approximately $20 million in an expansion project that is intended to increase the throughput capacity of the Red River Pipeline. We contributed approximately $3.5 million related to such expansion project.
The Unaudited Pro Forma Consolidated Financial Statements of the Partnership consist of a Condensed Consolidated Balance Sheet at March 31, 2019 and Condensed Consolidated Statements of Income for the year ended December 31, 2018 and the three-month period ended March 31, 2019, which reflect the Partnership's acquisition of its 33% membership interest in Red River as if it occurred on March 31, 2019 with respect to the Unaudited Pro Forma Condensed Consolidated Balance Sheet, and on December 31, 2018 with respect to the Unaudited Pro Forma Condensed Consolidated Statements of Income. The Unaudited Pro Forma Condensed Consolidated Financial Statements included herein have been derived from the following carve-out financial statements of the Red River Pipeline System prepared by Plains:
the audited financial statements of the Red River Pipeline System as of and for the year ended December 31, 2018 set forth in Exhibit 99.1 to the Partnership's Current Report on Form 8-K/A filed with the U.S. Securities and Exchange Commission ("SEC") on August 2, 2019; and
the unaudited interim financial statements of the Red River Pipeline System as of March 31, 2019 and for the three months ended March 31, 2019 and March 31, 2018 set forth in Exhibit 99.2 to the Partnership's Current Report on Form 8-K/A filed with the SEC on August 2, 2019.
The unaudited pro forma condensed consolidated financial information has been prepared for illustrative purposes only and is not necessarily indicative of our financial position or results of operations, nor is such unaudited pro forma condensed consolidated financial information necessarily indicative of the results to be expected for any future period. The pro forma adjustments are based on estimates and currently available information and assumptions that management believes are reasonable.
The unaudited notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements provide a detailed discussion of how such adjustments were derived and presented in the unaudited pro forma financial information. The unaudited pro forma condensed consolidated financial information and related notes thereto were derived from and should be read in conjunction with the historical consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 1, 2019 and the historical condensed consolidated financial statements and related notes thereto included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 filed with the SEC on May 9, 2019.
The Partnership acquired its ownership interest in the Red River Pipeline Joint Venture primarily using borrowings under its third amended and restated senior secured revolving credit agreement with Fifth Third Bank, as administrative agent, and a syndicate of lenders (the "DKL Credit Facility").


2 |


Delek Logistics Partners, LP
Unaudited Pro Forma Condensed Consolidated Balance Sheet
(in thousands, except unit and per unit data)
 
 
March 31, 2019
 
 
Delek Logistics Partners, LP
 
Investment in Red River Pipeline Company, LLC
 
Delek Logistics Partners, LP Pro Forma
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
5,356

 
$
(128,656
)
(a)
$
4,414

 
 
 
 
128,000

(b)
 
 
 
 
 
(286
)
(c)
 
Accounts receivable
 
21,538

 

 
21,538

Inventory
 
6,669

 

 
6,669

Other current assets
 
629

 

 
629

Total current assets
 
34,192

 
(942
)
 
33,250

Property, plant and equipment:
 
 
 
 
 
 
Property, plant and equipment
 
453,591

 

 
453,591

Less: accumulated depreciation
 
(146,712
)
 

 
(146,712
)
Property, plant and equipment, net
 
306,879

 

 
306,879

Equity method investments
 
107,830

 
128,942

(a) (c)
236,772

Operating lease right-of-use assets
 
19,186

 

 
19,186

Goodwill
 
12,203

 

 
12,203

Marketing contract intangible, net
 
136,407

 

 
136,407

Other non-current assets
 
23,511

 

 
23,511

Total assets
 
$
640,208

 
$
128,000

 
$
768,208

LIABILITIES AND DEFICIT
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Accounts payable
 
$
5,511

 
$

 
$
5,511

Accounts payable to related parties
 
10,522

 

 
10,522

Excise and other taxes payable
 
4,496

 

 
4,496

Pipeline release liabilities
 
3,293

 

 
3,293

Current portion of operating lease liabilities
 
4,258

 

 
4,258

Accrued expenses and other current liabilities
 
10,940

 

 
10,940

Total current liabilities
 
39,020

 

 
39,020

Non-current liabilities:
 
 
 
 
 
 
Long-term debt
 
705,175

 
128,000

(b)
833,175

Asset retirement obligations
 
5,290

 

 
5,290

Operating lease liabilities, net of current portion
 
14,928

 

 
14,928

Other non-current liabilities
 
17,700

 

 
17,700

Total non-current liabilities
 
743,093

 
128,000

 
871,093

Deficit:
 
 
 
 
 
 
Common unitholders - public; 9,113,359 units issued and outstanding at March 31, 2019 (9,109,807 at December 31, 2018)
 
168,389

 

 
168,389

Common unitholders - Delek Holdings; 15,294,046 units issued and outstanding at March 31, 2019 (15,294,046 at December 31, 2018)
 
(303,902
)
 

 
(303,902
)
General partner - 498,110 units issued and outstanding at March 31, 2019 (498,038 at December 31, 2018)
 
(6,392
)
 

 
(6,392
)
Total deficit
 
(141,905
)
 

 
(141,905
)
Total liabilities and deficit
 
$
640,208

 
$
128,000

 
$
768,208


See accompanying notes to unaudited pro forma condensed consolidated financial statements



3 |


Delek Logistics Partners, LP
Unaudited Pro Forma Condensed Consolidated Statement of Income
(in thousands)
 
 
Year Ended December 31, 2018
 
 
Delek Logistics Partners, LP
 
Investment in Red River Pipeline Company, LLC
 
Delek Logistics Partners, LP Pro Forma
 
 
 
 
 
 
 
Net revenues:
 
 
 
 
 
 
   Affiliate
 
$
240,809

 
$

 
$
240,809

   Third party
 
416,800

 

 
416,800

Net revenues
 
657,609

 

 
657,609

 
 
 
 
 
 
 
Cost of sales:
 
 
 
 
 
 
Cost of materials and other
 
429,061

 

 
429,061

Operating expenses (excluding depreciation and amortization presented below)
 
55,924

 

 
55,924

Depreciation and amortization
 
24,108

 

 
24,108

Total cost of sales
 
509,093

 

 
509,093

Operating expenses related to wholesale business (excluding depreciation and amortization presented below)
 
2,820

 
 
 
2,820

General and administrative expenses
 
17,166

 

 
17,166

Depreciation and amortization
 
1,882

 

 
1,882

Loss on asset disposals
 
891

 

 
891

Total operating costs and expenses
 
531,852

 

 
531,852

Operating income
 
125,757

 

 
125,757

Interest expense, net
 
41,263

 
4,836

(d)
46,099

(Income) from equity method investments
 
(6,230
)
 
(9,036
)
(e)
(15,266
)
Other expense, net
 
8

 

 
8

Total non-operating expenses (income), net
 
35,041

 
(4,200
)
 
30,841

Income before income tax expense
 
90,716

 
4,200

 
94,916

Income tax expense
 
534

 

 
534

Net income attributable to partners
 
$
90,182

 
$
4,200

 
$
94,382

Comprehensive income attributable to partners
 
$
90,182

 
$
4,200

 
$
94,382

 
 
 
 
 
 
 
Less: General partner's interest in net income, including incentive distribution rights
 
25,543

 
84

(f)
25,627

Limited partners' interest in net income
 
$
64,639

 
$
4,116

(f)
$
68,755


See accompanying notes to unaudited pro forma condensed consolidated financial statements


4 |


Delek Logistics Partners, LP
Unaudited Pro Forma Condensed Consolidated Statement of Income
(in thousands)
 
 
Three Months Ended March 31, 2019
 
 
Delek Logistics Partners, LP
 
Investment in Red River Pipeline Company, LLC
 
Delek Logistics Partners, LP Pro Forma
 
 
 
 
 
 
 
Net revenues:
 
 
 
 
 
 
   Affiliates
 
$
62,965

 
$

 
$
62,965

   Third party
 
89,518

 

 
89,518

     Net revenues
 
152,483

 

 
152,483

Cost of sales:
 
 
 
 
 
 
Cost of materials and other
 
96,265

 

 
96,265

Operating expenses (excluding depreciation and amortization presented below)
 
15,307

 

 
15,307

Depreciation and amortization
 
6,124

 

 
6,124

Total cost of sales
 
117,696

 

 
117,696

Operating expenses related to wholesale business (excluding depreciation and amortization presented below)
 
751

 

 
751

General and administrative expenses
 
4,473

 

 
4,473

Depreciation and amortization
 
450

 

 
450

Loss on asset disposals
 
2

 

 
2

Total operating costs and expenses
 
123,372

 

 
123,372

Operating income
 
29,111

 

 
29,111

Interest expense, net
 
11,301

 
1,440

(d)
12,741

(Income) from equity method investments
 
(1,951
)
 
(1,554
)
(e)
(3,505
)
Total non-operating expenses (income), net
 
9,350

 
(114
)
 
9,236

Income before income tax expense
 
19,761

 
114

 
19,875

Income tax expense
 
65

 

 
65

Net income attributable to partners
 
$
19,696

 
$
114

 
$
19,810

Comprehensive income attributable to partners
 
$
19,696

 
$
114

 
$
19,810

 
 
 
 
 
 
 
Less: General partner's interest in net income, including incentive distribution rights
 
7,270

 
2

(f)
7,272

Limited partners' interest in net income
 
$
12,426

 
$
112

(f)
$
12,538


See accompanying notes to unaudited pro forma condensed consolidated financial statements





5 |


Delek Logistics Partners, LP
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

Note 1 - Basis of Presentation

The unaudited pro forma condensed consolidated financial information presents the application of pro forma adjustments to our historical financial statements to eflect (i) the Red River Pipeline Joint Venture and (ii) the payment of estimated expenses in connection with the Red River Pipeline Joint Venture. The unaudited pro forma condensed consolidated statements of income for three months ended March 31, 2019 and the year ended December 31, 2018 give effect to the Red River Pipeline Joint Venture as if it had occurred on January 1, 2018, and the unaudited pro forma condensed consolidated balance sheet as of March 31, 2019 gives effect to the Red River Pipeline Joint Venture as if it had occurred on March 31, 2019.

Note 2 - Pro Forma Balance Sheet

(a) Reflects the actual cash contribution to Red River for the Partnership's membership interest in the Red River Pipeline Joint Venture which totaled approximately $128.7 million.

(b) Reflects the actual borrowings under DKL Credit Facility for the acquisition amounting to $128.0 million. The difference between the cash consideration transferred and the increase in the DKL Credit Facility is attributed to the use of cash on hand.

(c) Reflects actual transaction costs incurred by the Partnership associated with the investment in the Red River Pipeline Joint Venture.

Note 3 - Pro Forma Net Income

(d) Reflects pro forma incremental interest expense attributable to the increase to the DKL Credit Facility associated with the Red River Pipeline Joint Venture, based on applying actual weighted average interest rates under the DKL Credit Facility for the periods to the new borrowing.

(e) Reflects the pro forma allocation of investment income based on application of the Partnership's ownership interest to the Red River Pipeline Joint Venture's net income for the respective periods. The following table represents the impact of Red River's earnings on the Partnership's investment income for the year ended December 31, 2018 and the three months ended March 31, 2019 ($ in thousands):

 
 
Twelve Months Ended
 
Three Months Ended
 
 
December 31, 2018
 
March 31, 2019
Red River net income
 
$
27,383

 
$
4,710

Partnership share of Red River net income
 
$
9,036

 
$
1,554


(f) Reflects the allocation of earnings associated with the Red River Pipeline Joint Venture to the general and limited partners according to their respective ownership percentages.

6 |